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Jaguar Land Rover in £1bn China deal

The West Midlands-based luxury marque has signed a deal with Chery Automobile to build a plant near Shanghai, but says it will not move manufacturing out of Britain.

The deal will see Jaguars and Land Rovers built alongside a new model with a different brand name, but the Chinese-made models will be in addition to existing output. It is a 50-50 venture and will allow Jaguar Land Rover (JLR) to avoid import duties in China, now the firm's biggest market.

A research and development facility and engine production plant will be built as part of the venture, with the main manufacturing plant expected to be completed during 2014.

Sales of Jaguars and Land Rovers in China are already up 80 per cent in the first 10 months of 2012, according to the company's financial figures.

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Land Rover, Jaguar Land Rover

The quintessentially British firm supplied more than 75 vehicles for the latest Bond flick Skyfall, including the opening chase sequence where Bond is shot while slugging it out on top of a moving train.

It is the first time JLR will make cars outside the UK although JLR competitors Volkswagen AG and Mercedes-Benz have already started manufacturing in China.

"JLR needs to be localised because, quite frankly, their competition is localising," said analyst Bill Russo, president of Synergistic Ltd. "It gives Chery an opportunity to really upgrade its capabilities."

Freelander or Evoque?

State-owned Chery is China's largest car exporter with 15 years experience in the automobile industry and JLR plans to build vehicles designed specifically for the Chinese market. The Tata-owned JLR did not reveal which model would be built at the factory but In the past, Jaguar has said it is likely to be the Land Rover Freelander or Evoque.

"China is now our biggest market," Ralf Speth, chief executive officer of Jaguar Land Rover, said at a press briefing. "The Chinese economy has grown at a phenomenal rate in recent years and by any western standard, and I'm convinced that it is set to continue to grow at an astounding rate."

The first cars will probably roll off the production line in 2014.

Jaguar Land Rover's earnings rose 77 per cent in the second quarter to £305m, driven largely by sales of Evoque in China. The company also expects to spend £2bn to introduce 40 new or upgraded models in the next five years.